Judges in the U.S. and outside are not compelled by the current code, Section 304, to cooperate with each other in cross-border bankruptcies. But the Model Law on Cross-Border Insolvencies, adopted by the United Nations in 1997 with a mandate that each member country adopt it separately, would require such cooperation.

Under the Model Law, the country that is the center of an insolvent company's main interest or is its principal place of business would be the home of the central proceeding.

That is good news for U.S. judges, since much of the assets and business focus of cross-border bankruptcies such as Lernout & Hauspie Speech Works NV are in the U.S. and not in the company's country of incorporation.

"Section 304 is very broad and general," said Jay Westbrook, bankruptcy and international litigation professor at the University of Texas and a former attorney. "Simply put, the Model Law gives a lot more structure."

Indeed, section 304 isn't even officially recognized around the world; it's a U.S. law. But the Model Law — and the U.S. version of it, Chapter 15 — would be globally recognized.

"Chapter 15 streamlines procedures and gives the court, by stature, more power than it previously had," said Marty Zohn, a partner at Proskauer Rose in Los Angeles.

He said the strongest power the Model Law gives judges is the ability to administer assets.

Also, while the Model Law would automatically make the nation where the bankrupt company's main interests lie the dominant legal forum, it would also compel that court to consider the views of the other jurisdiction. Currently, such consideration isn't mandatory.

In some jurisdictions, creditors lose their ability to reach assets altogether, especially if the lead jurisdiction prefers liquidation. Among its top five objectives, the Model Law explicitly sets out a preference for rehabilitation over liquidation during insolvency proceedings, which bankruptcy experts said is good news for U.S. creditors.

"People around the world are beginning to realize that trying to save a company saves so much value for so many people, principally creditors," said Westbrook, who co-headed the U.S. delegation during negotiations at the United Nations.

The Model Law would go a long way toward clarifying ambiguities that arise over a multijurisdictional dispute over assets. "An increasing number of multinational companies are going into default, and we must have ways of coping with that and getting as much value out of the system as possible," Westbrook said.

Congress has passed the Model Law, to be enacted as a new Chapter 15 of the federal bankruptcy code, as part of general bankruptcy reform legislation. Congress must still form a conference committee to reconcile Senate and House versions of the measure before forwarding it to President Bush for his signature.

Some bankruptcy experts and practitioners have called for Congress to carve the Chapter 15 provision out of the general reform legislation and pass it as an independent bill.

So far, Japan, Mexico and Eritrea in East Africa have adopted the Model Law. South Africa has adopted a modified form, and the U.K., Australia and New Zealand have introduced enabling legislation to permit its adoption.

The Model Law allows for a rational approach, said Zohn. "It eliminates the uncertainty and controversy that existed" under current bankruptcy law, he said.

Westbrook said the Model Law also would set forth concrete requirements for recognition. Under current law, judges had to figure that out for themselves, he said.

Creditors, too, will benefit, he said. The Model Law has an expressed provision for giving special notice to creditors with foreign addresses to make sure they have proper notice of proceedings.